Orbital Announces Fourth Quarter and Full Year 2013 Financial Results

DULLES, Va., Feb 13, 2014 (BUSINESS WIRE) --
Orbital Sciences Corporation
ORB, +9.85%
today reported its fourth
quarter and full year 2013 financial results. Fourth quarter 2013
revenues were $375.4 million, a new quarterly record for the company,
compared to $354.6 million in the fourth quarter of 2012. Fourth quarter
2013 operating income was $30.5 million, or 8.1% operating margin,
compared to $31.3 million, or 8.8% operating margin, in the fourth
quarter of 2012.

Net income in the fourth quarter of 2013 was $16.9 million, or $0.28
diluted earnings per share, compared to $13.9 million, or $0.23 diluted
earnings per share, in the fourth quarter of 2012. Adjusted net income*
was $18.2 million, or $0.30 adjusted diluted earnings per share*, in the
fourth quarter of 2013. Orbital’s free cash flow* in the fourth quarter
of 2013 was $12.7 million compared to $0.3 million in the fourth quarter
of 2012.

Full year 2013 revenues were $1,365.3 million, compared to $1,436.8
million in 2012. Operating income was $113.5 million in 2013, or 8.3%
operating margin, compared to $112.6 million, or 7.8% operating margin,
in 2012. Full year 2013 net income was $68.4 million, or $1.13 diluted
earnings per share, compared to $61.0 million, or $1.02 diluted earnings
per share, in 2012. Adjusted net income was $69.7 million, or $1.15
adjusted diluted earnings per share, in 2013. Full year free cash flow
was positive $17.0 million in 2013, compared to negative $34.3 million
in 2012.

Mr. David W. Thompson, Orbital’s Chairman and Chief Executive Officer,
said, “Orbital’s fourth quarter financial results reflected solid growth
in revenues, earnings per share and free cash flow, and capped a very
successful year in 2013. The company’s operations last year were
highlighted by the successful introduction of our Antares medium-class
space launch vehicle and Cygnus cargo logistics spacecraft, as we
concluded a multi-year research and development program to create these
products and set the stage for expanded operational performance in 2014
and beyond.” He added, “With new orders and option exercises for 38
major launch vehicles and satellites and other new business wins last
year valued at $2.3 billion, Orbital looks forward to a promising year
in 2014.”

Revenues increased $20.8 million, or 6%, in the fourth quarter of 2013
compared to the fourth quarter of 2012. Revenues increased $21.3 million
in the launch vehicles segment and $16.3 million in the advanced space
programs segment. Revenues declined $20.5 million in the satellites and
space systems segment. Intersegment revenue eliminations decreased $3.7
million.

Operating income decreased $0.8 million, or 3%, in the fourth quarter of
2013 compared to the fourth quarter of 2012. Operating income declined
$11.8 million in the satellites and space systems segment, but increased
$5.9 million in the advanced space programs segment and $5.1 million in
the launch vehicles segment.

Adjusted net income was $18.2 million, or $0.30 adjusted diluted
earnings per share, in the fourth quarter of 2013, compared to adjusted
net income of $17.4 million, or $0.29 adjusted diluted earnings per
share, in the fourth quarter of 2012. These adjusted results exclude the
impact of certain transactions that are not reflective of recurring
operations. Fourth quarter 2013 results reflected a $1.6 million
improvement due to a reduction in interest expense attributable to the
company’s refinancing of its debt in the fourth quarter of 2012.

Full year 2013 revenues decreased $71.5 million, or 5%, compared to full
year 2012. Revenues declined $108.7 million in the satellites and space
systems segment and $0.7 million in the advanced space programs segment,
partly offset by a revenue increase of $24.4 million in the launch
vehicles segment and a $13.5 million reduction in intersegment revenue
eliminations.

Full year 2013 operating income increased $0.9 million, or 1%, compared
to full year 2012 operating income. Operating income increased $12.6
million in the launch vehicles segment, but decreased $12.3 million in
the satellites and space systems segment and $1.5 million in the
advanced space programs segment. Full year 2012 also included $2.1
million of costs related to a potential acquisition that was not
consummated.

Adjusted net income was $69.7 million, or $1.15 adjusted diluted
earnings per share in 2013, compared to adjusted net income of $64.5
million, or $1.08 adjusted diluted earnings per share, in 2012. Full
year 2013 results reflected a $6.7 million improvement due to lower
interest expense attributable to the company’s refinancing of its debt
in the fourth quarter of 2012.

Launch vehicles segment revenues increased $21.3 million in the fourth
quarter of 2013 compared to the fourth quarter of 2012 primarily due to
increased activity on missile defense interceptors for the Ground-based
Midcourse Defense (GMD) program and Antares launch vehicles for the
Commercial Resupply Services (CRS) program. These revenue improvements
were partially offset by lower revenues from certain space and target
launch vehicles.

Segment operating income increased $5.1 million in the fourth quarter of
2013 compared to the fourth quarter of 2012 principally due to increased
activity and improved profit margins from Antares launch vehicles and
missile defense interceptors. Segment operating margin increased
primarily due to the profit margin improvements from GMD missile defense
interceptors and CRS Antares launch vehicles.

Satellites and space systems segment revenues decreased $20.5 million in
the fourth quarter of 2013 compared to the fourth quarter of 2012
primarily due to decreased activity on commercial communications
satellite contracts attributable to the completion of several satellites
in late 2012 and early 2013.

Segment operating income decreased $11.8 million in the fourth quarter
of 2013 compared to the fourth quarter of 2012 principally due to
decreased activity on commercial communications satellite contracts and
favorable changes in profit estimates in the fourth quarter of 2012 on
contracts that were substantially completed. Segment operating margin
decreased primarily due to the effect of the favorable changes in
contract profit estimates recognized in the fourth quarter of 2012.

Advanced space programs segment revenues increased $16.3 million in the
fourth quarter of 2013 compared to the fourth quarter of 2012 primarily
due to activity on a new advanced programs contract awarded in 2013,
partially offset by decreased activity on national security satellite
contracts.

Segment operating income increased $5.9 million principally due to a
profit margin improvement on the CRS contract and activity on a new
advanced programs contract awarded in 2013. Segment operating margin
increased mainly due to the margin improvement on the CRS contract.

New Business Highlights

In the fourth quarter of 2013, Orbital recorded approximately $155
million in new firm and option contract bookings. In addition, the
company received approximately $470 million of option exercises under
existing contracts. For full year 2013, Orbital received approximately
$1.70 billion in firm and option bookings and approximately $640 million
of option exercises under existing contracts. As of December 31, 2013,
the company’s firm contract backlog was approximately $2.15 billion and
its total backlog (including options, indefinite-quantity contracts and
undefinitized orders) was approximately $5.16 billion.

Operational Highlights

In the fourth quarter of 2013, Orbital successfully carried out several
important satellite and launch vehicle missions for its customers,
highlighted by the completion of the Commercial Orbital Transportation
Services (COTS) demonstration mission to the International Space Station
(ISS) for NASA in October. This successful demonstration mission marked
the completion of the research and development phase of the Antares
rocket and Cygnus spacecraft projects, paving the way for the company’s
first operational cargo delivery mission to the ISS under the CRS
contract, which was launched in January 2014. Also in the fourth
quarter, the company launched its 25th Minotaur rocket for the U.S. Air
Force from Wallops Island, Virginia, deployed the SES-8 commercial
communications satellite for SES of Luxembourg, conducted two
short-range Coyote target launches for the U.S. Navy, and launched four
suborbital research rockets carrying scientific experiments for NASA.
For all of 2013, Orbital averaged approximately one satellite or rocket
mission, major test event or product delivery to customers per week,
making it one of the busiest periods in the company’s history.

Orbital expects another active year of operations in 2014, with up to 60
operational events planned this year. These will include three CRS
missions (including the CRS-1 mission launched in January) using the
Antares rocket and Cygnus spacecraft, the deployment of an Earth science
satellite for NASA and commercial communications satellites for Thaicom
of Thailand and Hispasat of Spain, as well as numerous launches of
missile defense vehicles and smaller research rockets, and product
deliveries to customers for future use.

2014 Financial Guidance

The company updated its 2014 preliminary outlook provided in October
2013 with the following financial guidance for 2014:

The guidance for 2014 is based on a variety of assumptions about future
business conditions and operational events, including new business
bookings, U.S. Government budget levels, production and operational
schedules and tax policies. This guidance assumes that the effective
income tax rate will be between 35% and 37% in 2014.

Disclosure of Non-GAAP Financial Measures

We define free cash flow as GAAP (U.S. Generally Accepted Accounting
Principles) net cash provided by operating activities less capital
expenditures for property, plant and equipment, plus net proceeds from
disposition of property in 2012. A reconciliation of free cash flow to
net cash provided by operating activities for 2013 is included above in
the section entitled “Cash Flow.” Management believes that the company’s
presentation of free cash flow is useful because it provides investors
with an important perspective on the company’s liquidity, financial
flexibility and ability to fund operations and service debt.

Adjusted net income is defined as GAAP net income adjusted to exclude
the following: (i) a $10 million charge ($6.1 million after tax) in 2013
to write off an option payment in connection with a business agreement
that was terminated in the fourth quarter of 2013 in connection with the
conclusion of litigation, (ii) a $3.7 million gain ($3.7 million after
tax) on the sale of investments in the fourth quarter of 2013, (iii)
$10.3 million ($6.3 million after tax) of debt extinguishment expense in
the fourth quarter of 2012 and (iv) favorable income tax adjustments
pertaining to extraterritorial income exclusions in 2013 and 2012.
Adjusted diluted earnings per share is equal to adjusted net income
divided by diluted shares. These measures are provided so investors can
more easily compare current and prior period results without the impact
of these significant charges and adjustments. The reconciliation of GAAP
net income to adjusted net income is as follows:

Orbital does not intend for the above non-GAAP financial measures to be
considered in isolation or as a substitute for the related GAAP
measures. Other companies may define these measures differently.

Social Media Disclosure

Orbital communicates material financial information to its investors
using press releases, SEC filings, its investor relations website,
public conference calls and webcasts. From time to time, Orbital
communicates information regarding its business and operations, such as
new contract awards and mission updates, via Twitter and Facebook. It is
possible that the information disclosed through such social media
channels could be deemed to be material. Therefore, we encourage
investors, the media, and others interested in Orbital to review the
information we disclose through Twitter at https://twitter.com/OrbitalSciencesand on Facebook at https://facebook.com/OrbitalSciencesCorp.

About Orbital

Orbital develops and manufactures small- and medium-class rockets and
space systems for commercial, military and civil government customers.
The company’s primary products are satellites and launch vehicles,
including low-Earth orbit, geosynchronous-Earth orbit and planetary
exploration spacecraft for communications, remote sensing, scientific
and defense missions; human-rated space systems for Earth-orbit, lunar
and other missions; ground- and air-launched rockets that deliver
satellites into orbit; missile defense systems that are used as
interceptor and target vehicles; and advanced flight systems for
atmospheric and space missions. Orbital also provides satellite
subsystems and space-related technical services to U.S. Government
agencies and laboratories. More information about Orbital can be found
at http://www.orbital.com.

Certain statements in this press release may be forward-looking in
nature or “forward-looking statements” as defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, those related to our
financial outlook, liquidity, goals, business strategy, projected plans
and objectives of management for future operating results and forecasts
of future events. These statements can be identified by the fact that
they do not relate strictly to historical or current facts.
Forward-looking statements often include the words “anticipate,”
“forecast,” “expect,” “believe,” “should,” “will,” “intend,” “plan” and
words of similar substance. Such forward-looking statements are subject
to risks, trends and uncertainties that could cause the actual results
or performance of the company to be materially different from the
forward-looking statement. Uncertainty surrounding factors such as
continued government support and funding for key space and defense
programs, including the impact of sequestration under the Budget Control
Act of 2011, new product development programs, the availability of key
product components, product performance and market acceptance of
products and technologies, achievement of contractual milestones,
government contract procurement and termination risks and income tax
rates, as well as other risk factors and business considerations
described in the company’s SEC filings, including its annual report on
Form 10-K, may materially impact Orbital’s actual financial and
operational results. Orbital assumes no obligation for updating the
information contained in this press release.

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